Public

Relations
Assignment ii
The Odwalla Juice Company Crisis

alen jose thomas

bd/14/930
fc-vi
Odwalla Inc.
Odwalla Juice Company was started in 1986 by a
group of health-conscious friends living together in
the San Francisco Bay area. Starting with a hand juic-
er and organically grown fruit, the owners produced
fresh juice in the back shed of one of the founders
homes and sold their juice by delivering it daily to
area restaurants. Perhaps the most essential part of
their business model was their claim that their juice
was fresh from the fruit and without the pasteuriza-
tion process that was used by other juice producers.
In fact, Odwalla was one of the pioneers of a wid-
er movement in the United States favouring more
organic food consumption. Odwallas founders held
the belief that pasteurization, the process of heating
the juice to a certain temperature for purposes of
killing any bacteria that had developed during grow-
ing, picking, or processing, affected the taste of the
juice and was unnecessary. Instead, Odwalla used an
acid-based rinsing process to kill bacteria. Producing
fresh organic fruit juice as a central component of its
business model, Odwalla developed a loyal following
of consumers that desired the freshest juice possible
and its sales grew exponentially. By the mid-1990s,
Odwalla was selling nearly $90 million worth of juice
per year.
Soil To Soul
Odwallas founders were at the forefront of the
corporate social responsibility movement that can
be traced to the mid-1980s. Indeed, as one of their
founders was fond of saying, they embraced a Zen-
like philosophy in all of their dealings, where com-
munity was an important factor in the equation.
The company employed a soil to soul metaphor to
describe its commitment to using fresh organic fruit
(soil) to nurture the body whole (soul) of its con-
sumer. Odwallas reputation as a socially responsible,
growth-oriented company flourished as they received
awards from Business Ethics magazine in 1995 for
Outstanding Corporate Environmentalism and from
Inc. magazine in 1996 as Employer of the Year.
Crisis on
The Coast
In early October 1996, an outbreak of E. coli2 struck as 60 other consumers were hospitalized with E. coli
several West Coast states, including California and related illnesses in a period of just one month. At
Washington, and reached into western Canada as the height of the outbreak, government investigators
well. E. coli is a potentially deadly bacterium that de- confirmed that the Odwalla products were in fact the
velops as a result of contamination of food products source of the E. coli contamination. Odwalla imple-
or processing. On October 30, 1996, health officials mented a media strategy including daily statements
in the state of Washington notified Odwalla that they to the press, internal conference calls where manag-
were investigating a possible link between the E. coli ers were informed of updates, and setting up a Web
outbreak and Odwalla apple and carrot juice. After site to disseminate information. Odwalla publicly
learning of the potential link, Odwallas executive promised to pay for all medical expenses of injured
management team had an emergency meeting to dis- consumers and to re-evaluate its manufacturing pro-
cuss their response. Although there was no demon- cess immediately.
strable link at this point, Odwallas executive man-
agement team decided to mobilize a voluntary recall
of products containing apple or carrot products.
This was a major financial commitment involving
the removal of Odwalla products from nearly 4,600
retail outlets in seven states in just 48 hours. Odwalla
claimed that it spent $6.5 million on the recall effort.
Odwallas corporate crisis took a tragic turn when
in November 1996, a 16-month-old child died from
E. coli after drinking Odwalla apple juice. As many
Fall out
Odwallas brand name was decimated by the crisis.
Immediately after the outbreak, Odwallas stock price
dropped 34 percent and sales of its juice products
fell 90 percent in one month. The outbreak triggered
numerous investigations by federal and state author-
ities. Customers filed negligence lawsuits claiming
that Odwalla had known that the acid-rinse method
was ineffective and that scientific studies had shown
that the method was effective in killing bacteria that
caused E. coli only 8 percent of the time. After it had
been shown that pasteurization was a widely-used
practice in the industry (although not required by
federal or state laws) and that Odwalla management
had ignored its own head of quality assurances warn-
ing about potential contamination sources in the
factory, the Food and Drug Administration levied a
$1.5 million fine, the largest in the agencys history at
that time.
Immediately after the recall, Odwalla was widely
praised by the media and commentators for its han-
dling of the crisis. The company decided that, despite
mounting financial pressures from lawsuits and fines,
no employees would be laid off and that they would
continue to donate to community charities. Odwalla
hired a public relations firm that constructed a stan-
dard explanation that the contamination was unfore-
seeable and that all appropriate safety measures were
in place.
The public largely believed Odwallas explanations
because its reputation for social responsibility was
iron-clad in its consumers minds. Even the parents
of the child whose E. coli-related death had ignit-
ed the crisis were quoted as saying that they didnt
blame the company for her death and that Odwalla
had done everything they could have under the cir-
cumstances. However, during the discovery process
in one of the lawsuits filed by an injured consumer,
it was revealed that Odwalla had more knowledge of
a potential health hazard prior to the outbreak than
had been previously reported. A report surfaced that
indicated that the U.S. Army had rejected Odwallas
proposal to sell their juice in U.S. Army commissar-
ies after an Army inspector found uncommonly high
levels of bacteria in a sample and concluded that the
risk of contamination was extraordinarily high. The
Army rejection had taken place four months prior
to the E. coli outbreak. Responding to the Armys
findings, Odwallas head of quality assurance recom-
mended that the company add an additional layer
of contamination protection by employing a chlo-
rine-based washing system for the fruit. His recom-
mendations were rejected, however, due to manage-
ments concern that the chlorine wash would affect
the taste of the juice. After the Army disclosures were
made public, Odwalla settled several lawsuits de-
spite its earlier resistance to a nonlitigation solution.
Soon after the settlement, The Seattle Times wrote a
scathing editorial about Odwallas course of action.
The editorial predicted that Odwalla would forever
be known as the careless provider of poisoned fruit
juice. Odwallas stock was now trading at its lowest
level ever, and the company was incurring massive
debt to cover litigation costs and technology up-
grades.
Odwalla today
After the fallout from the E. coli crisis, Odwalla
invested heavily in quality assurance technology
and eventually became an innovator of a flash- pas-
teurization process that killed all bacteria, but kept
the fresh taste and quality of the juice intact. Just
two years after the crisis began, the readers of San
Francisco Magazine voted Odwalla Best Brand.
Although the company looked poised for a come-
back, it had accrued substantial debt and was forced
to begin exploring the possibility of merger oppor-
tunities. After a merger with East Coast juice maker
Fresh Samantha in 2000, Odwalla ended up as part
of a large acquisition by the Minute Maid division of
The Coca-Cola Company in October 2001. Today,
Odwalla remains a subsidiary of Coca-Cola and has
over 650 employees. Their management continues to
focus on its soil to soul model and now feature 25
organic products within eight product lines including
smoothies, soy shakes, and food bars.